May 23, 2005
Monday

The Alaska State House today approved a bill that would reform the state's retirement system, which has been reported to face a $5.7 billion underfunded liability that threatens the benefits of those currently in the system.

Despite reportedly heavy lobbying by national labor unions, the House approved a bill to create a defined contribution plan for new employees to the Public Employees' Retirement System and Teachers' Retirement System.

The defined contribution plan is similar to a 401(k) pension plan common in the private sector or the Thrift Savings Plan used by the federal government. The traditional "defined benefit" pension plan for former and current public employees remains unchanged.

"By their actions, legislative leadership has validated more than a year's worth of research and painstaking analysis throughout the regular and special session," Governor Frank H. Murkowski said. "We're making the necessary changes to 'stop the bleeding' in our overburdened pension system and bring more stability to the retirement system."

"Legislators stood up to outside union leaders and delivered an Alaska solution to this Alaska problem," Murkowski said. "For that, I thank them."

Senate Bill 141 also establishes a Health Reimbursement Arrangement, funded by employer contributions, which will allow pre-tax dollars to be set aside for medical expenses and will be available at the time of retirement.

In addition, it creates a new Alaska Retirement Management Board that will advise policymakers on solutions to the underfunded status of the retirement systems.

The House vote came one day after it approved the most comprehensive workers' compensation reform bill passed since statehood. Senate Bill 130 addresses rising medical costs and the costs of workers' compensation fraud, improves the reemployment benefits system and establishes predictability in workers' compensation claims and appeals.

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